“Most successful investors, in fact, do nothing most of the time.”
-Jim Rogers
Here’s what you need to know this week:
· Stocks restart their winning streak as SpaceX goes public
· Markets react to an apparent deal with Iran
Back on Track
The S&P 500 squeezed out a 0.6% gain last week, ending stocks’ slide from last week and marking the tenth week of gains out of the last eleven. Investor sentiment was mildly bolstered by last week’s Consumer Price Index (CPI) reportwhich showed annualized inflation rising sharply to 4.2%:
While the headline number rising so quickly is obviously not good, investors paid more attention to the Core CPI print of 2.8% annualized. Core CPI measures inflation without food and energy costs; the wide divergence between the two means that oil is the primary driver of headline inflation, and the general expectation is that oil will revert to the mean when the US reaches a deal with Iran (more on that in a moment).
In other news, SpaceX officially launched their stock on Friday. Trading was much less volatile than many anticipated and the stock closed up about 20% on the day. The company’s enterprise value reached roughly $2 trillion which made Elon Musk the world’s first trillionaire. SpaceX has continued to gain early this week, although its lofty valuation of ~150 times revenue means any new buyers should approach with caution.
Iran Deal(?)
President Trump announced on Sunday that the US and Iran reached a preliminary deal to end the war and reopen the Strait of Hormuz. US and Iranian officials signed the memorandum of understanding (MOU) on Monday morning, marking the beginning of finalizing details of the peace agreement. Stocks soared on the news, with the NASDAQ gaining more than 3% on Monday[1].
As everyone knows, the war has taken a significant toll on oil prices, and the apparent peace deal has had an immediate impact on the oil market. Brent Crude (oil from the Middle East) prices have fallen by more than 12% this week in anticipation of the Strait of Hormuz reopening:
The chart above shows the volume of ships crossing the strait of Hormuz each day. If you look at the very top of the chart you can see the prewar average and realize how constricted traffic has become. If shipping returns quickly to its prewar pace then oil prices should fall swiftly.
There is still ambiguity as to the actual terms of the deal, which have not been made public. Reports have varied widely as to monetary exchanges, whether the Strait of Hormuz will now charge a toll to passing ships, what restrictions will be placed on Iran, Israel, Lebanon, the list goes on. We will learn more details in the coming days as the deal is finalized, but for now the market clearly views the impending deal as a positive development.
What Else
· The US is preparing to celebrate its 250th anniversary this July 4th; the Great American State Fair will start the festivities on June 25th
· A B-52 crashed at Edwards Air Force Base in California, killing all eight service members onboard
· Israeli Prime Minister Benjamin Netanyahu said that Israel will keep military forces in Lebanon despite the US-Iran peace deal
· President Trump joined a meeting of G7 leaders to discuss the latest developments in the Russia-Ukraine war
· The New York Knicks defeated the San Antonio Spurs 4 games to 1, giving the beleaguered franchise its first championship in 53 years and ending one of the longest championship droughts in American sports
· The Carolina Hurricanes defeated the Vegas Golden Knights 4 games to 2 to win the Stanley Cup
· The FIFA World Cup is in full swing across North America and the US men’s team took their first game 4-1 against Paraguay; the US next plays Australia this Friday at 2:00 PM
What We’re Reading
La Sagrada Familia Basilica has finally finished construction after more than 144 years. The church has undergone continuous construction since Antoni Gaudí began work on the chapel in 1882 and the basilica dwarfs surrounding Barcelona at 566 feet. Pope Leo XIV attended the inauguration ceremony which coincided with the 100th anniversary of Antoni Gaudí’s death. Click below to read the history of the church and to see photos of this architectural marvel:
What’s Happening Downtown
Factory Obscura is hosting A Summer Solstice Celebration this Saturday, June 20th. This event runs from 7:30 – 10:00 PM and features a crafting session, a “frolic” through Automobile Alley before ending with a dance party for the final hour. The Celebration is free to attend and costumes are encouraged, click below to learn more and see photos from last year’s celebration:
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess, Hannah Hartman
[1] NYT